Jobless claims drop, nearing 5-year low

WASHINGTON -- The number of people who applied last week for new unemployment benefits fell to the second-lowest level in five years, perhaps reflecting an uptick in the steadily improving U.S. labor market.Initial jobless claims fell by 10,000 to a seasonally adjusted 332,000 in the week ended March 9, the Labor Department said Thursday. Economists surveyed by MarketWatch had expected claims to rise to 350,000 from a revised 342,000 in the prior week.The only reading that's been lower in the past five years occurred in mid-January, but that number was distorted by post-holiday layoffs and other unusual seasonal factors. The latest claims report did not include any unusual factors, a Labor official said.The average of new claims over the past month, which smooths out weekly volatility, declined by 2,750 to 346,750, Labor said. That's the lowest level in five years.Weekly claims had mostly stayed north of 360,000 in the past year. So the recent trend - claims have been below 350,000 in four of the past five weeks - suggests the labor market is getting healthier.The economy has added an average of more than 200,000 jobs a month the past four months, a sharp acceleration from last summer. And other economic reports suggest businesses are more willing to hire.Yet the U.S. labor market is by no means fully healed. The jobless rate, at 7.7 percent, is still high, well above the 6.5 percent goal set by the Federal Reserve. The Fed has said it plans to keep a key short-term interest rate at historic lows until the unemployment rate falls.Claims are also more closely tied to layoffs than to new hires, chief economist Stephen Stanley of Pierpont Securities points out. Most of the problem with the labor market "is the languid pace of hiring," he said.While fewer layoffs are welcome, Stanley added, it doesn't mean the economy is adding jobs fast enough to ease the concerns of the Fed.Economists are watching to see if higher U.S. taxes and especially the onset of billions in federal spending cuts will dampen hiring over the next few months.Companies that contract with the federal government, particularly defense firms, may have to furlough or lay off workers in response to lower government spending. Most economists think the effect of the spending cuts is likely to be small, however.In the week ended March 2, meanwhile, continuing claims declined by 89,000 to a seasonally adjusted 3.02 million. Continuing claims reflect the number of people who already receive regular unemployment benefits. Most states typically offer 26 weeks of unemployment pay.

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